Philadelphia Business Tax Update
New Businesses in Philadelphia
Qualifying new businesses who apply for and meet all requirements, will not have to pay for their business privilege license when they apply for it and must file but will not owe any business privilege tax (BPT) for the first two years they are in business.
The definition of a "new business" is outlined below:
- A New Business is defined as a business that was not subject to the Business Privilege Tax at any time during the five (5) Tax Years preceding Tax Year 2012.
- The bill provides various situations that exclude a new business from qualifying as a New Business for the purpose of this Chapter. For example, the term New Business does not include a business that is primarily engaged in holding, selling, leasing, transferring, managing or developing real estate.
- As a condition of maintaining New Business status, the business must 1) as of the 12-month anniversary of becoming subject to the Business Privilege Tax and continuously thereafter through the 18-month anniversary of becoming subject to such tax, have at least three full-time employees who are not family members and who work in the City at least sixty percent (60%) of the time; 2) as of the 18-month anniversary of becoming subject to the Business Privilege Tax and continuously thereafter through the 24-month anniversary of being subject to such tax, have at least six full-time employees who are not family members and who work in the City at least sixty percent (60%) of the time; and 3) must file with the Department of Revenue a New Business Waiver Application, in such form as the Department shall determine, setting forth the New Business's commitment to meet the employment and other requirements of this Chapter and such other information as the Department shall require.
- At the end of its second anniversary of becoming subject to Business Privilege Tax, a New Business shall cease to be a New Business.
- A business that otherwise qualifies as a New Business does not lose its status as such if it ceases to exist prior to the end of its second anniversary.
- The Department of Revenue is authorized to promulgate regulations including regulations regarding the determination of whether a business qualifies as a New Business, what documentation must be submitted by a business claiming "New Business" status and a certification that the business was not formed for the purpose of evading or avoiding payment of taxes or fees that would otherwise be due. If the Department finds that a taxpayer claiming the status of a New Business was not entitled to that status, the taxpayer shall be liable for any unpaid taxes, including any charges, interest, penalties and costs that are applicable under the law.
News for Existing Business in Philadelphia
- Additional across-the-board exclusion from Taxable Receipts received by any business subject to the Business Privilege Tax. This exclusion phases-in beginning in Tax Year 2014 with an exclusion of the first $50,000 in taxable receipts. The exclusion will increase to the first $75,000 for tax year 2015 and will reach the maximum with the first $100,000 exclusion of taxable receipts for tax year 2016 and thereafter.
- A deduction for the pro rata portion of net income attributable to the receipts exclusion provided under the first item.
- A Single Sales Factor Apportionment Tax Credit.
- A suspension of the scheduled receipts tax-rate reduction and for a lower net income tax-rate reduction than the scheduled rate reduction.
New name for Business Privilege Tax
Philadelphia has changed the name of the "Business Privilege Tax" (BPT) to the "Business Income and Receipts Tax". Other than the revisions mentioned above, the tax itself remains the same.
Posted: February 2016
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